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How to Use Legal Fees as a Tax Deduction

1.

Ask your attorney to provide a detailed breakdown of services provided and their general purposes on each bill so that you can easily determine the portions of each bill that are deductible or nondeductible.

2.

Assemble documentation and records of the legal fees you have paid during the tax year. Break them down by category and the reason why they are tax deductible

3.

Deduct legal fees for nonbusiness tax issues on line 21 of Schedule A. Include issues related to tax preparation, determination, payment and refunds of any nonbusiness taxes.

4.

Use line 27 of Schedule A, "Other Miscellaneous Deductions," to take a tax deduction for legal fees incurred in an attempt to do your job, keep your job or produce or collect taxable personal income.

5.

Use line 27 for legal fees related to tax advice related to a divorce or to the collection of taxable alimony payments.

6.

Complete the rest of Schedule A and file it with Form 1040 if your itemized deductions exceed the amount of your standard deduction.

Use Schedule C to Deduct Business Legal Fees

1.

Review your attorney's bills to your business to subtract and personal legal services that may have been included in this billing. These costs may be appropriate for deductibility with your personal miscellaneous deductions on Schedule A.

2.

Total your legal fees for business purposes and enter the amount on line 17. This amount may be combined with other professional fees such as a CPA's billings.

3.

Complete Schedule C and file it with Form 1040.



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